Tariffs and AI Drive Inflation Equally: Fed Study Reveals

A recent study by the Minneapolis Federal Reserve reveals that tariffs and AI factors are equally contributing to elevated core inflation in the US. As of July 2026, tariffs contributed 0.2-0.4 percentage points to core inflation, which remains above Fed target levels.

Core PCE (Personal Consumption Expenditures Price Index) inflation reached 3.3% year-over-year through July, the highest since 2023 and outside of the pandemic, the highest since the early 1990s.

The study found that AI-driven demand for memory and computer hardware has pushed up prices for video and information processing equipment by a staggering 12.2 percent year-over-year through July, adding roughly 0.4 percentage points to core PCE inflation, comparable to the entire tariff contribution.